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Disruption of cardiac neural crest cells (CNCCs) results in congenital heart disease, yet we do not understand the cell fate dynamics as these cells differentiate to vascular smooth muscle cells. Here we utilized single-cell RNA-sequencing of NCCs from the pharyngeal apparatus with heart in control mouse embryos and when Tbx1, the gene for 22q11.2 deletion syndrome, is inactivated. We uncovered three dynamic transitions of pharyngeal NCCs expressing Tbx2 and Tbx3 through differentiated CNCCs expressing cardiac transcription factors with smooth muscle genes, and that these transitions are altered non-autonomously by loss of Tbx1. Further, inactivation of Tbx2 and Tbx3 in early CNCCs resulted in aortic arch branching defects due to failed smooth muscle differentiation. Loss of Tbx1 interrupted mesoderm to CNCC cell-cell communication with upregulation of BMP signaling with reduced MAPK signaling and failed dynamic transitions of CNCCs leading to disruption of aortic arch artery formation and cardiac outflow tract septation.